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Rate Update

In spite of all the stuff going on with our government, and in Europe (or maybe because of it), mortgage rates continue to be low. Last week Moody’s and S&P placed the US on a negative credit watch thanks to the lack of political progress towards a debt deal, raising the odds for a credit downgrade. The current environment of high political uncertainty, in both the US and Europe, is particularly challenging for investors, as these political risks are surely among the hardest to forecast. This climate of uncertainty is conducive to more volatile bond markets, whether it is overnight or intraday. Fed Chairman Ben Bernanke stated that Congress needs to raise the debt ceiling and develop a budget that would narrow the deficit over time but not make drastic immediate cuts that could hurt the recovery. President Barack Obama challenged Congress to compromise and “do something big” to reduce long-term deficits. Government spending currently outpaces revenues by about 5% of GDP. Several options have been proposed to resolve the debt showdown, with Republicans leaning toward spending cuts and Democrats looking for increased revenues through tax increases. Some pundits argue it would make more sense to have them work on the deficit than focusing on the artificial debt ceiling limit that has been raised ten times in ten years.

Currently, the 30 Year Fixed is 4.250% (4.416% APR) and the 15 Year Fixed is 3.375% (3.560% APR). This week’s economic news includes Housing Starts & Building Permits, Existing Home Sales, Jobless Claims and a couple of home price indices.

Written by Central Coast Lending - Go to Central Coast Lending's Website/Profile